Fraudsters continue to develop new ways to increase their ill-gotten gains and a trend over the last several years is an increase promotional abuse, loyalty abuse and return fraud, beyond the standard forms of third party fraud that results in chargebacks. This article discusses five common forms of return fraud.
Bricking scams seek to trick return centers into believing an item was returned so they provide a refund which cannot be clawed back when they realize they’ve been duped. The fraudster will file a return and send back the box and packaging, but rather than return the product, they fill it’s box with rocks, batteries, or other objects that mimic a similar weight. Another variation of this is stripping an electronic device or computer of its most valuable components before sending it back. For example, a fraudster may purchase a computer and remove the internal hard drive before returning it.
Professional fraudsters and fraud rings often specialize in scams where expensive items are purchased but a counterfeit, lower end or similar item of significantly less value is returned in the more expensive products place. One example is targeting rechargeable batteries for power tools or electric scooters, where batteries look very similar but have different voltage or amp hours (Ah) capacities. Rechargeable batteries that do not last as long and cost less are purchased from one party or location, while more expensive batteries are purchased elsewhere. The fraudsters pay careful attention when opening the packaging and replacing the more expensive battery with the lower capacity version, then return the lesser battery in the packaging and with the receipt of the more expensive one. The fraudster is refunded the larger dollar amount, and profits the difference between the cost of the lower capacity battery and what they were able to sell the stronger battery for secondhand.
Steal and Return
A common form of return fraud is an extension beyond typical third party fraud, where a fraudster hopes to return a product purchased with a stolen payment card before the chargeback is recognized. Many to most goods targeted by fraudsters are stolen with the intent of re-selling them on the secondhand market, but this is often for an amount less than the standard retail price. Returning that good to the merchant they stole it from, however, can provide full retail sales value. This is typically a multi-channel attack where the fraudulent purchase is made online and the return is in-store.
Wardrobing is return fraud that specifically targets the apparel industry and has become widespread because many of the perpetrators do not consider it to be fraud. Wardrobing is the act of purchasing clothing that is only intended to be worn once or a handful of times before returning the items within the allotted return window. The customer had no intention of keeping the product, they only intended to borrow it. Wardrobing has increased in recent years as fashion-focused social media “influencers” engage in this behavior to create new content.
Merchandise exchange scams can also be perpetrated by people who are not full-time fraudsters. In this scheme, a consumer has an expensive product that is broken or they just want to replace. They purchase a new version of this product, but then return their older, broken version, possibly claiming the product was defective. This can also target exchanging one component of a product, for example, a consumer replacing a laptop battery that is shot by purchasing a new laptop from the same brand, then returning the new laptop with their old battery that no longer hold a charge.